Billions in federal penalties at issue in BP spill trial

NEW ORLEANS — Images of oil-coated birds and testimony about "widespread socio-cultural harm" opened the third phase of a trial to establish environmental penalties BP must pay for spilling millions of barrels of crude into the Gulf of Mexico in 2010.

The government wants the oil giant to pay another $13.7 billion for harming not just the birds and fish, but the business climate and social fabric of coastal communities.

She based her findings on interviews with more than 1,300 people — not only fishermen who derive their living from the Gulf, but bankers and business owners of all kinds. Even florists described a sudden drop in orders after the spill, she said.

Harm was widespread because so much of life along the coast depends on both fishing and energy production, both of which were upended while BP struggled for 87 days to cap the crude gushing from the undersea Macondo well.

"People who work offshore often times also fish," she said. "Grocery stores that provide food to commercial fishing vessels also provide to the offshore oil and gas industry ... When all of these economic sectors went down at the same time, it had a huge effect."

Austin's work was done for the federal Bureau of Ocean Energy Management, which oversees offshore oil and gas extraction. BP attorneys attacked these findings in briefs and were expected to challenge her methodology in court.

Also on display Tuesday were images of former BP CEO Tony Hayward, who drew widespread criticism for saying "I'd like my life back" long before the disaster was contained, and when memories of the 11 workers killed on the oil rig were still raw.

"They continue to focus on their own hardships," Justice Department Attorney Steven O'Rourke told U.S. District Judge Carl Barbier, who has ruled that BP acted with "gross negligence" in the disaster.

O'Rourke disputed BP's arguments that any federal Clean Water Act penalties should be held to an unspecified minimum, since the company's spill-related costs already total $42 billion, including $14 billion for cleanup, plus criminal penalties and economic settlements with affected businesses.

O'Rourke also said Anadarko, a minority partner in the Macondo well, should pay more than $1 billion in penalties. Anadarko attorneys argue that the corporation was a "non-operational" partner and should not be punished with a civil penalty.

BP attorney Mike Brock, previewing his side's arguments, told the judge that BP mounted a major effort to mitigate damage from the April 20, 2010, disaster.

"Before we even knew that oil was flowing, BP was marshalling resources to prepare for the worst," Brock said, displaying a map of response centers stretching from Florida to Texas and recounting the hiring of thousands of workers to handle the spill response.

The government says damage was extensive, and ongoing.

Brock denied that, saying that "the incident did not cause significant adverse impact to populations" of sea life, and that "the injury is not nearly what folks feared in 2010."

Arguments also will center on the economic impact of a high fine on BP Exploration and Production, the affiliate involved in the Macondo well project, and its parent, BP PLC, and whether the current low price of oil and its effect on the corporations' health should be a factor in the penalties.

Phase 1 of the trial determined that BP was grossly negligent, a finding the company is already appealing. Barbier also determined, in Phase 2, that 3.19 million barrels were ultimately spilled, roughly midway between BP's estimate of 2.45 million barrels and the government's figure of 4.2 million. The higher figure would have meant potential penalties of around $18 billion.

The judge has scheduled three weeks for Phase 3, and plans to keep taking briefings from both sides into April as experts debate the short- and long-term effects of the spill on the environment, business climate and social fabric of the Gulf of Mexico.